We welcome City Attorney Jan Goldsmith’s decision to sue the San Diego City Employees Retirement System (SDCERS) over how it interprets the City Charter. Goldsmith’s arguments deserve a thorough hearing.

At issue is language in charter section 143, which appears to be unprecedented in California. It says the city “shall contribute annually an amount substantially equal to that required of the employees for normal retirement allowances” and “shall not be required to contribute in excess of that amount.”

Goldsmith says the proper interpretation of “substantially equal” is plain: The city and its current workers share the responsibility for adequately funding the pension system, which presently has a $2.1 billion shortfall in funds available to pay for $6.3 billion in promised pension benefits. This big gap is why the city must pay a record $231.7 million in its actuarially required contribution to the pension system on July 1.

The city attorney says employees don’t share responsibility for underfunding created by the City Council’s irresponsible 1996 and 2002 decisions to raise benefits while cutting pension fund contributions, but that they do have “substantially equal” responsibility for SDCERS’ vast investment losses and much smaller extra costs created by changes in actuarial formulas. These add up to more than a third of the city’s unfunded liability. Under this interpretation, the city’s 9,000 employees would owe about $40 million of the $231.7 million the city must pay SDCERS on July 1 – more than $4,000 per employee.

Goldsmith’s interpretation is dismissed by Ann Smith, the lawyer for the Municipal Employees Association, the city’s largest union, as being “not at all consistent with any of the guiding principles for this system or the guiding principles of law.” Smith is right that this argument appears to go against what SDCERS and the city have done for decades, which could well sway the courts. But any assertion that Goldsmith’s argument goes against the specific “guiding principles” of the City Charter is deeply problematic. In a June 16, 1954, letter to the City Council from Assistant City Attorney Shelley J. Higgins, the author of charter section 143, Higgins wrote that it meant that both the city and its employees were responsible for making up a shortfall if the performance of the “retirement trust fund” is insufficient to secure “the result contemplated by the formula of the retirement plan.”

What the courts will decide can’t be known, of course. But if Higgins’ letter is taken seriously, City Charter section 143 could help lessen San Diego’s pension migraine. If city employees had to pay much more of the total tab for their pension benefits, many would seek to switch to smaller, less costly benefits. If this were allowed under state law and Internal Revenue Service regulations, it would be great news for a city that could use some.